It is now quite possible to complete simple tax returns online and many people still use paper returns. However, it is easy to make mistakes or omissions that could result in an HMRC tax investigation or cost you money by paying too much tax unnecessarily. Listed below are some of the most common errors we come across in the course of the hundreds of clients we see each year together with some advice on how to avoid problems.
1. General – Incorrect Dates
It is so easy to report dates that do not fit within the tax year you are reporting on. If you do that then the tax return will be returned. Remember that if you are self employed you have to find an accounting year ending in the tax year in question to report on. If you are reporting savings interest or share dividends, they need to have a tax date before 5th April in the relevant year. Simple mistakes here can use problems.
2. Employment – Reimbursed Expenses Not Claimed
When you receive reimbursements for work expenses, these will be reported on the form P11D which will be issued to you when the tax year is over. This is then recorded as a benefit in kind on the Employment pages of your tax return. All too often, that is where taxpayers stop; and they are then charged tax on the reimbursed expenses! You have to remember to also record the expenses as an expense as well as a benefit. Then the two cancel each other out in the calculation and you do not have any additional tax to pay.
3. Self Employment – A Large Claim for 'Other' Expenses
Probably the most common error we see when prospective clients bring in a tax return they filed themselves that is being investigated is a large proportion of self employed expenses recorded simple as other. So we see income as, say £ 40,000 and total expenses of £ 8,000 of which £ 6,000 is recorded as 'Other'. It immediately begs the question as to what these expenses are that can not be put into the specific categories on the tax return and make provoke an investigation into whether they are legitimate.
4. Residence – Making Sure You Make a Domicile Claim
If you are resident in the UK but not domiciled here you may be entitled to claim the remittance basis for overseas earnings. In other words, this non-UK income is only taxed in the UK if it is transferred into the UK. But you must make the claim to be non-domiciled in the tax return for the remittance basis to apply. It can be an expensive omission if you fail to do this.
5. Capital Gains – Failing to Claim Losses
Capital losses must be claimed on your tax return within a specified number of years if they are to offset in the future against capital gains. Once you have made the claim you can offset the losses against a gain at any time in the future. But if you fail to make the claim for losses, you do ever lose the benefit so do it straight away in the year the losses occur.
A little care can save unnecessary trouble and expense so complete your tax return carefully. If in doubt about what to do, you should consult a professional advisor.